Question: Please round the final answers at least into two decimal places Two stocks: stock D and stock E are trading in the stock market. Stock

Please round the final answers at least into two decimal places Please round the final answers at least into two decimal places Two

Two stocks: stock D and stock E are trading in the stock market. Stock price of D is $73 now. Dwill be priced at $63 next year if there is a recession, $83 if economy will be normal, and 893 if economy expands again after vaccine of COVID-19 proved to be working globally. The probability of recession, normal and expansionary economy next year are 13%, 73%, and 14% respectively. D pays no cash dividend and has a correlation coefficient of 30% with the market portfolio. Stock E has an expected return of 13%, a standard deviation of 33%, and a correlation coefficient of 9% with the market portfolio and a correlation coefficient of 33% with stock D. The market portfolio has a standard deviation of 13%. Assume the capital asset pricing model holds. a. b. If you are a typical risk averse investor with a well-diversified portfolio, which stock will you prefer? Explain. (13%) What are the expected return and standard deviation of a portfolio having 23% of stock D and 77% of stock E? (6%) What is the beta of the portfolio in part b? (6%)

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